This article was originally published by Michael Snyder at The Economic Collapse Blog.
Somehow we have convinced ourselves that AI companies that are bleeding billions upon billions of dollars are great investments because there is a possibility that someday they will eventually become profitable. But the losses just keep getting even bigger every year. Meanwhile, we are spending trillions of dollars to build even more AI infrastructure. There is no way that the AI industry is ever going to generate the sort of revenue that will justify that level of investment. What we are witnessing is a capital misallocation of absolutely epic proportions, and it is inevitable that this entire bubble is going to come crashing down. When that finally happens, it will be unlike anything we have ever seen before.
Stanford University says that “total global corporate investment in AI reached $1.6 trillion” from 2013 to 2024…
According to the 2025 AI Index Report by Stanford University, between 2013 and 2024, total global corporate investment in AI reached $1.6 trillion. This substantial expenditure dwarfs even the largest scientific and infrastructure projects of the 20th and 21st centuries.
That number is so high that it is difficult to believe.
But last year we took things to an entirely new level.
We are being told that total worldwide spending on AI in 2025 was 2.5 trillion dollars…
According to Gartner, a United States-based business and technology insights company, worldwide spending on AI is forecast to total $2.5 trillion in 2026, a 44 percent increase over 2025.
We are building a tremendous amount of AI infrastructure, but is it worth it?
For a long time, investors have been completely sold on the idea.
In fact, over the last three years, the “value of AI-linked firms has climbed $27 trillion”…
The American stock market is booming, thanks to artificial intelligence. Tech giants are borrowing billions to acquire AI talent, purchase chips and hardware, and construct data centers. And market watchers are starting to get worried. They see financiers bulldozing giant piles of money to private AI start-ups with no realistic path to profitability, tech companies reliant on other tech companies for revenue growth, and non-tech businesses without a lot to show for their AI investments. The value of AI-linked firms has climbed $27 trillion in the past three years—an astonishing amount, equivalent to 36 percent of the value of the entire U.S. stock market today.
AI mania has reached a fever pitch.
But are these firms really worth that much money?
Of course not.
In fact, most of them are bleeding colossal amounts of cash.
A perfect example is OpenAI. Ed Zitron is warning that when OpenAI inevitably fails, it could take the entire stock market down with it…
The AI bubble is simple, Ed Zitron says, because it’s really a bubble in a single company: OpenAI.
As the ChatGPT maker heads toward a momentous IPO, the vocal AI critic says that OpenAI is the only reason anyone cares about AI at all—and it’s failure would spark a collapse similar to the one set off by Lehman Brothers when the bank fell apart in 2008.
OpenAI is supposedly worth more than 800 billion dollars.
But the financial numbers that it reported for 2025 were absolutely nightmarish…
- Revenue: $13.07 billion
- Cost of Revenue: $7.5 billion
- Research and Development: $19.18 billion
- Sales and Marketing: $5.73 billion
- General and Administrative: $1.57 billion
- Total Costs and Expenses: $34 billion
- Loss from Operations: $20.92 billion
For the entire year, OpenAI reported a total net loss of 38.5 billion dollars…
Please note that 2025 was the year that OpenAI converted from a non-profit to a for-profit entity, leading to a $41.55 billion loss due to changes in fair value of convertible interests and warrant liability.
Taking into account other minor factors like interest income and interest expense, OpenAI is left with a net loss of $60.35 billion, which it lowered to $38.53 billion by removing $17.87 billion in costs via that “net loss attributable to noncontrolling members capital” and another $3.95 billion via a “net loss attributable to redeemable noncontrolling interests.”
Ultimately, the net loss attributable to OpenAI in 2025 was $38.5 billion.
If I hired thousands of people and we all started flushing dollar bills down the toilet as fast as we possibly could, there is no way that we could ever lose that much money in an entire year.
OpenAI is a financial black hole.
Sam Altman promised us that OpenAI would soon be making $100 billion a year in ad revenue alone, but that isn’t the way that things have worked out.
Sadly, OpenAI is currently on pace “to undershoot its own five-year ad revenue projections by a whopping 90 percent”…
Even as the AI bubble becomes a mainstream talking point on Wall Street, tech companies continue to peddle the fantasy that AI is poised to become an almost magical money-maker. Case in point, OpenAI wants you to believe that by 2030, it’ll be raking in $100 billion a year just from ads alone — even though it’s currently struggling to reach just $1 billion.
That massive gulf was observed in a new analysis from marketing consulting firm Emarketer, first flagged by AdWeek, which found OpenAI is on pace to undershoot its own five-year ad revenue projections by a whopping 90 percent. In fact, Emarketer’s take is even more devastating than that: it estimates the entire addressable market for chatbot advertising — the maximum amount of money up for grabs overall — at $5.4 billion.
This is an unmitigated disaster.
Other AI companies are producing similar results.
Meanwhile, a lot of companies are now ditching expensive AI models that were created in the United States for much cheaper AI models that were created in China…
As corporate AI bills spiral out of control, many companies are beginning to ask themselves a simple question: why pay a pretty penny for the US’s leading AI models when Chinese ones are far cheaper?
Major companies like DoorDash, Airbnb, and Siemens are adopting Chinese AI tools, the Financial Times reports, attracted not only by their lower costs but their “open-weight” approach that allows them to be molded to each company’s particular needs.
According to data from OpenRouter, a platform that provides all-in-one access to major AI models and tracks their usage, leading Chinese models from DeepSeek and Z.ai have overtaken US equivalents like Anthropic’s Claude and OpenAI’s ChatGPT. Cost-cutting, it seems, trumps all geopolitical rivalries.
Chinese models are “the elephant in the room,” Eugene Cheah, CEO of the AI platform Featherless AI, told the FT. “Enterprises are starting to realize, ‘Hey, we don’t need the best model, we can use the faster, cheaper models.’”
It has become very clear that AI companies will never be the money trees that they were touted to be by their most fervent proponents.
In fact, the biggest money losers will end up being some of the most dramatic financial flops of all time.
So what does that mean for the stock market?
From a long-term point of view, stock prices are insanely high…
The S&P 500 Shiller CAPE ratio’s long-term average is around 17, and it’s been steadily creeping higher over the last decade or so.
Right now, the ratio is nearing 42 — the highest it’s been since the dot-com bubble, when it peaked at around 44.
The Shiller CAPE Ratio has stayed above 40 since May, which is only the second time in history that it’s remained this high. The first time was in January 1999, when it stayed above 40 until September 2000.
What goes up must eventually come down.
When the public hears that the AI bubble has burst, there will be a frenzied race for the exits, and the financial devastation that we will witness will be off the charts.
It is just a matter of time.
But for the moment, the race to create new AI models continues, and there is a very real possibility that this technology could escape our control.
For example, OpenAI has revealed that it created a model that “went rogue”, escaped into the Internet and hacked into the computer system of another company…
ChatGPT creator OpenAI has revealed one of its advanced Artificial Intelligence models went rogue during a security test and hacked into a start-up company.
Bosses said the autonomous agent, which is an AI system that operates alone following human instruction, was being tested in a controlled environment.
But it found vulnerabilities and managed to escape containment before reaching the internet and breaking into Hugging Face, a major hub for sharing AI models.
That is scary.
As AI technology continues to develop at an exponential rate, what else will it eventually be able to do?
Our world has become such a strange place.
Ray Kurzweil believes that a decade from now we will be so integrated with AI that we won’t even know if our thoughts are truly our own or if they are being fed to us from highly advanced AI models.
Personally, I would never allow anyone to put a chip into my head or connect my brain directly to the Internet.
But a lot of people out there would eagerly welcome such technology.
Science fiction is rapidly becoming science reality, and things are only going to get weirder from here.
Michael’s new book entitled “10 Prophetic Events That Are Coming Next” is available in paperback and for the Kindle on Amazon.com, and you can subscribe to his Substack newsletter at michaeltsnyder.substack.com.
About the Author: Michael Snyder’s new book entitled “10 Prophetic Events That Are Coming Next” is available in paperback and for the Kindle on Amazon.com. He has also written nine other books that are available on Amazon.com, including “Chaos”, “End Times”, “7 Year Apocalypse”, “Lost Prophecies Of The Future Of America”, “The Beginning Of The End”, and “Living A Life That Really Matters”. When you purchase any of Michael’s books, you help to support the work that he is doing. You can also get his articles by email as soon as he publishes them by subscribing to his Substack newsletter. Michael has published thousands of articles on The Economic Collapse Blog, End Of The American Dream and The Most Important News, and he always freely and happily allows others to republish those articles on their own websites. These are such troubled times, and people need hope. John 3:16 tells us about the hope that God has given us through Jesus Christ: “For God so loved the world, that he gave his only begotten Son, that whosoever believeth in him should not perish, but have everlasting life.” If you have not already done so, we strongly urge you to invite Jesus Christ to be your Lord and Savior today.
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